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Stocks Gain Following Bernanke Speech

No immediate stimulus from Federal chief, but confidence in the future.

Ben Bernanke

Federal Reserve chairman Ben S. Bernanke today didn’t deliver the hoped-for hints that he was ready to jump-start the economy again, but he did signal his continued confidence in the country’s longer-term growth and investors accepted that as good enough — for now.

 

Stocks fell as Bernanke began his speech at an economic symposium in Jackson Hole, Wyo., but rallied shortly after he wrapped up.

 

The S&P Retail Index was up 2.2 percent, or 10.5 points, to 498.33 and the Dow Jones Industrial Average was ahead 1.2 percent, or 134.72 points, to 11,284.54 as markets settled.

 

Among the retailers gaining ground were Coach Inc., up 6.5 percent to $54.79; Nordstrom Inc., 5.3 percent to $42.07, and J.C. Penney Co. Inc., 1.9 percent to $26.67. Shares of Tiffany & Co. rose 9.4 percent to $69.03 after the company reported a 33.1 percent gain in second-quarter profits.

 

Markets in Europe lost ground for the day with the CAC 40 down 1 percent in Paris, the DAX off 0.8 percent in Frankfurt and FTSE 100 down 0.02 percent in London. Burberry was one of the FTSE 100 top performing stocks, with a 3.2 percent rise, while on the Continent, Hermès rose 1.6 percent and Swatch Group was up 2.3 percent. Britain also released downbeat data earlier today, with the country’s Office of National Statistics saying that GDP grew 0.2 percent in the second quarter, a slowdown from 0.5 percent growth in the previous quarter.

 

In the U.S., Bernanke took on the economic fears that have helped roil markets this month. “Might not the very slow pace of economic expansion of the past few years, not only in the United States but also in a number of other advanced economies, morph into something far more long-lasting?” he said.

 

Bernanke said he was optimistic about the country’s longer-run prospects, though he also acknowledged that Washington would do well to find a better way to make fiscal decisions. “The growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years,” he said. “It may take some time, but we can reasonably expect to see a return to growth rates and employment levels consistent with those underlying fundamentals.”

 

The central banker said the slowdown in economic activity during recessions typically causes enough pent-up demand to put the country back into growth mode as confidence returns. But both the financial and the housing crises have slowed the natural recovery process and Bernanke noted the rate of home construction is still less than one-third of its precrisis level. Bernanke also prodded lawmakers — who for weeks argued over the debt ceiling last month, risking a possible U.S. default ultimately contributing to Standard & Poor’s downgrade.

 

“The country would be well served by a better process for making fiscal decisions,” Bernanke said. “The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses.”

 

Consumers appear to have taken Washington’s difficulties to heart.

 

The Thomson Reuters-University of Michigan Surveys of Consumers’ consumer confidence index to fell to 55.7 this month from 63.7 in July and 68.9 a year earlier.

 

“The recent surge in pessimism was due to lost confidence in the ability of the government to enact policies that would counteract the growing threat of a renewed recession,” said Richard Curtin, chief economist for the Surveys of Consumers.